Final answer:
Comprehensive income is the changes in equity from all sources except those by nonowner sources and includes both net income and other comprehensive income. It is a broader measure of a company's total earnings and includes items not yet realized in net income. On a broader economic scale, personal and disposable income terms are used to describe income at household levels, while current account balance represents a country's financial transactions.
Step-by-step explanation:
Comprehensive Income Overview
Comprehensive income is typically defined as the changes in equity for a period resulting from all sources other than those by nonowner sources. This encompasses all changes in equity during a period except for those resulting from investments by owners and distributions to owners. In more specific terms, comprehensive income includes net income, which is the revenue minus expenses for the period, as well as other elements of other comprehensive income (OCI).
OCI may include items that have not been realized through transactions, such as unrealized gains or losses on securities, foreign currency translation adjustments, and pension plan gains or losses. These are revenues, expenses, gains, and losses that are excluded from net income on the income statement because they have not yet been realized. Thus, comprehensive income provides a broader measure of a company's total earning performance than net income alone.
To understand this in the context of economic concepts, personal income is the income received by individuals, while disposable income is this income after taxes are paid and government transfers are added. On a larger scale, a country’s income can also include the money flowing in and out due to investments, which is factored into its current account balance.
Moreover, recognizing the difference between accounting profit and economic profit is essential as the former is calculated by deducting explicit costs from total revenue, while the latter also takes into account implicit costs. This distinction is important because taxes are paid based on accounting profit, but the true economic success of a company is determined by its economic profit.